I speak to a lot of journalists; between the circulation of “The Mortgage Insider” and the fact that I’ve been around as long as I have, they look to me as an authority for their stories.
The latest was in the influential trade magazine, “Scotsman’s Guide.” Reporter Victor Whitman reached out to me last week to get thoughts on subprime mortgages, and whether they are making a comeback. I had an opportunity to get back on my favorite soapbox–that there is a false narrative about how hard it supposedly is to get a mortgage. I’ve been writing on that topic for years–most notably in this article.
Whether you are buying or refinancing, getting a mortgage means getting an appraisal. Although a licensed appraiser does use some judgment in coming up with an opinion of value, the process is not as arbitrary or subjective as you might think. This movie explains how it all works.
One important part of your mortgage process is the appraisal. The lender will require this report to be sure there is adequate security for the loan they are about to give you. They want to have a good idea of the property’s value as part of the underwriting process.
Here’s how an appraisal is done. The appraiser, who is licensed by the State, will visit your property. He or she will measure it, take pictures and, for some loan programs, do a quick inspection to make sure there are no health or safety problems. The appraiser will describe the property, called the Subject Property, in a standardized way: square footage, room count, amenities, lot size, condition…things like that.
Then the appraiser will find at least three other properties (”comparable sales” or “comps”) similar to the subject and in close proximity that have have sold within the previous six months. They will describe each one of these in the same standardized way as they did the subject.
Having done that, the appraiser makes dollar adjustments to the comps to make them the equivalent of the subject. A comp with 200 square feet more living space than the subject would carry a negative adjustment of around $10,000. After adjusting the comps, the appraiser calculates a weighted average to arrive at an opinion of value. The lender will use this value to calculate its maximum loan. If your transaction is a purchase, the lender will use the lower of the appraised value or the agreed purchase price.
There’s all this talk about “escrow;” it opens, we’re in escrow, it closes. What is “it,” anyway? What happens there? Who does what? This movie explains all.
If you’ve never bought a house before, you may be wondering about this mysterious thing called “Escrow.” It opens, it closes, we’re in it…what is “it,” anyway?
The escrow is just a neutral third party whose job it is to make sure everyone gets what they agreed to. The escrow officer, usually someone who works for a title company, coordinates all the many documents that make up your transaction.
After all the parts of the transaction have been brought together, the escrow officer will prepare the “instructions.” This document has all the numbers and terms that you and the seller have agreed on—and they have to match perfectly, or else the transaction can’t go forward. When you sign the buyer’s instructions and all the other paperwork, you’re saying that those are the terms you agreed to.
After you’ve signed your name a whole lot of times, the escrow officer puts everything into a “funding package” and sends it off to the lender. A day or two later, the money is wired into the escrow. This is called “funding.” Documents are then recorded at the County and you own the house. This is the Close of Escrow. Most of it happens behind the scenes, but we think it is good for you to know what that whole process is.
For many first time home buyers, finding out that they’ll have to come up with closing costs along with their down payment can come as a rude surprise. For mortgages requiring a low down payment, like FHA, VA and 97% conventional loans, the closing costs can be more than the down payment. This movie explores what closing costs are, and suggests some strategies for handling them when you’re short on cash.
Once your loan officer submits your loan package for approval, it goes through a mysterious process called “underwriting.” When you know what that process is, though, you’ll see that it really is quite simple. This movie explains how it works.
Any Realtor® will tell you that you MUST have a solid preapproval letter from a lender before you make an offer. The process is not as difficult as you might think—but it is essential for success. Here’s what’s involved in getting preapproved.
Joseph M. Parsons, NMLS# 230285
First Priority Financial, Inc. dba PFS Funding
NMLS# 3257 is licensed by the Department of Business Oversight under the CRMLA.
Equal Housing Opportunity.
7080 Donlon Way, Suite 211
NMLS Consumer Access